Q 11.22. For convenience, assume a zero discount rate. You have no cash on hand and can only raise financing for new projects by issuing more equity. You know that your existing project will truly return $500 next year. Everyone knows that your second, newer project costs $200, but only you know that it will return only $180 next year. This newer project is the only one that investors think is in line with your current expertise-you cannot raise funds and deposit them elsewhere (or any new investors would smell a rat). 1. Does your second, newer project have a positive or negative NPV? 2. If your investors know both true projects' costs, but they also (incorrectly) believe that you have the magic touch and any of your expertise projects will earn a rate of return of 100%, what fraction of the firm would you have to sell to raise $200 to start the new project? 3. If you act on behalf of your existing investors, should you take this new project?